UPDATE 2-Brazil, banks to finalize electricity fund loan in late April -source

(Recast with possible loan disbursement and context)

By Alonso Soto and Guillermo Parra-Bernal

BRASILIA/SAO PAULO, April 7 A syndicated loan
aimed at helping struggling Brazilian electricity distributors
cope with the impact of dry weather could be finalized by the
end of April, a source with knowledge of the plan told Reuters
on Monday.

The government and banks are discussing the terms of the
possible loan worth 8 billion reais ($3.6 billion) to
electricity industry clearinghouse CCEE, a senior executive at
Banco Bradesco SA said earlier on Monday.

The plan, aimed at shoring up the finances of ailing power
distributors, will likely take the form of loan rather than a
bond sale, said Sergio Figueiredo, Bradesco's senior vice
president for wholesale and private banking, at an event in Sao
Paulo.

Private banks are expected to have an "important
participation" in the loan, said the source, who declined to say
how much money those banks are willing to disburse. The source
added that any contribution from state-run banks will not have
an impact on the budget since the National Treasury does not
intend to finance them.

Rating agencies have voiced worries about the involvement of
public funds in the operation after a sharp erosion of the
country's fiscal accounts prompted Standard & Poor's to cut
Brazil's rating closer to junk territory in March.

Three sources with knowledge of the situation told Reuters
in March that state-controlled lenders Banco do Brasil SA
and Caixa Econômica Federal SA have
discussed terms of the transaction with the government, as well
as Bradesco. Caixa and Banco do Brasil repeatedly declined to
comment.

The loan would go to the CCEE, a privately held entity in
charge of buying and selling electricity in the spot market,
which would subsequently funnel money into the coffers of
Brazilian power distributors.

Companies in the electricity sector are grappling with
soaring spot power costs amid the driest start of a year in
decades and the government's reluctance to increase consumer
rates before the October presidential election.

Ideally, two of the sources said in March, a pool of banks
would lend the money and peg the debt to receivables linked to
utility bills. Repayment could begin as early as next year, the
sources said.

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